How to financially prepare for maternity leave in Canada

We are incredibly blessed here in Canada to be able to take a long maternity leave to be home with our babies. This can be a time of amazing bonding with your baby, but for many it is a stressful experience with the addition of a much reduced family income and financial strain.

So you are wondering, How do you best prepare for maternity leave in Canada? When you find out you are pregnant, establish a plan for how to manage your day to day financial requirements with less, cut your monthly expenses, assess new purchases, and get started with a budget.

So, now that my kids are a bit older, I am passing along all of the things I have learned (specifically the past couple years) that would have taken some of the financial stress out of my year of maternity leave, and left our family thriving on less income.

1. Find out what your maternity leave benefit amount will be

Before you even begin your maternity leave, it is wise to find out roughly how much your Maternity leave amount will be.

According to the website, the maximum amount your benefit could be is $562/week. The benefit typically ends up being 55% of your average wage, up to $53, 000 in taxable income. So if you are earning a higher income then the maximum, your leave benefits could end up being less than 55% of your average weekly income.

There are a few things to take into consideration here, Canada is now offering an 18 month maternity leave option that is paid. However, the total amount that you will receive is identical to the 12 month leave, but your weekly payout amount will drop to 33% of your average weekly pay, with a maximum benefit of $337/week.

You can learn more specifics here.

Last, but not least, consider if your spouse will want to take part of the parental leave to be at home with the baby as well. This is something that I think many men under-utilize, so add that into your discussions to see what is best for your family.

2. Don’t make large purchases

One mistake that is very common to make as you head into a maternity leave is to purchase a new vehicle or home without considering your reduction in pay. You want to know how I know? Our family made both of those mistakes.

I am not telling you to not buy the things that your family needs, but before you do, I want you to actually sit down take a hard look at the numbers.

Can you make these payments once your income drops to either 33% or 55% of your typical income? Would you be able to continue making payments if at the end of your maternity leave you decided that you would like to not go back to work.

Often times the large purchases we make leave us feeling trapped, and unable to have the option of staying home with our kids if that’s what choose to do when our maternity leave is over.

I don’t want your family to feel trapped because you now have a van payment that you can’t afford without bumping your income back up.

Yes, that’s me, doing exactly what I am telling you not to do. If I could go back and change this knowing what I know now, we would have bought something a little older, and for cash.

3. Build a mock budget

Now that you have an estimate on what your income will likely be for your maternity leave, you need to create a budget that your family can live on using those dollar amounts.

Many large purchases are made immediately prior to having children while you you still have your regular income, without taking into consideration that you income is about to be massively reduced. Don’t fall into this trap!

Play around with your budgeting numbers for a few different scenarios:

  • A budget for while you are on your maternity leave receiving benefits
  • A budget for a maternity leave if you don’t qualify for paid leave
  • A budget that operates on a single income only, financially could you manage to stay home if your spouse is the sole income earner?
  • And last but not least, if you are considering making a large purchase such as a new vehicle or home, a budget that includes those additional monthly expense amounts.

There are a few really great budgeting programs out there to play around with these numbers. We currently use the everydollar app, but I have heard great thinks about YNAB and as well if you need an idea about where to get started.

4. Reduce your expenses

When I took a hard look at our finances a year and a half ago, we cut nearly $3000 our of our monthly expenses (more on how we did that here). Lately I have been regretting not taking such drastic measures prior to me going on maternity leave. Once my husband’s accident happened, and I was busy juggling a newborn, a toddler, and a severely concussed husband, I had no capacity left in my brain on even know how to begin to do that.

If I would have done this prior to our baby girl’s arrival, It would have reduced the amount of financial stress significantly, and would have helped us to possibly avoid the $52, 000 in debt we accumulated after my husband’s accident (if you are curious about that, read on here).

I want your maternity leave to be as far from stressful as possible. I want you to be able to be worried about nothing except learning how to be a momma, bonding with your baby, and making amazing memories in that first year. I want finances to be as far from your mind as humanly possible, and I promise you if you make the hard cuts before baby comes, it will bring a level of peace that you didn’t know was possible.

5. Decide what you will do when your leave is over

I swore up and down that I was never going to be a stay at home mom.

And then I had my baby.

When it came time to go back at the end of my year of mat leave, I wanted nothing more than to be able to stay at home with him, and I think I cried every day for a few weeks at the thought of leaving him.

I know that nothing can prepare you for life with a baby, or how you will feel once that baby arrives, but I want you to start thinking about it long before you ever near the end of your maternity leave.

If you have already reduced your lifestyle expenses down, it makes these decisions much easier to make because you can more easily assess your needs vs. your wants to see if they are realistic.

Some women ( and some men) are raising babies alone, and staying at home with your little one might not even be an option. To those moms I say, momma, you are incredible, you are powerful, you are strong and most importantly, you are an amazing mom. Lean hard on your tribe, surround yourself with people who love you and who believe in you. You CAN rock this single parenthood thing like a boss!

6. Start an emergency fund

Once you find out you are pregnant, start trying to beef up your savings accounts and emergency fund.

In Canada all of our medical expense are covered for the most part for when it comes time to actually deliver your baby. There is, however, always the possibility that you or the baby might need to travel to a higher level of care, for delivery or just after. This likelihood increases if you live in a rural area.

This savings account will help greatly in reducing the financial stress should that occur, and will help to take care of accommodation and food needs while you are away from home.

Some other things that I did not think about prior to baby girl’s arrival were some additional expenses to travel to have a lip and tongue tie clipped by a specialist, or chiropractor treatments to help with her vomiting. I wish we would have had additional money saved up to be prepared – but did I mention we spent that money on a van…

Learn from our mistakes!

When you and baby come home happy and healthy, and all of the dust settles, you can use that money to either pay down debt, or maybe its the first time you have had a real emergency fund – awesome! Tuck it away and save it for a rainy day.

How To Financially Prepare for a Maternity Leave in Canada: Motherhood and Money - There are some unique things about living in Canada surrounding maternity leave.  I am writing out some tips to help you make the most of your time off with your new baby.
No one ever goes into a delivery thinking they might need some extra cash. Having an emergency fund was a God send those first few weeks with our baby girl.

7. Get life insurance

Now, let me start this section by saying I hope that you never need to use a life insurance policy, but this is something you need to think about.

If this is your first baby, and you don’t already have it, you need life insurance to help protect your family financially should anything ever happen to you.

I am not an insurance expert, so seek one out and make sure your family is covered adequately should tragedy ever strike.

Here are some things I learned while asking questions:

The rule of thumb is you want to insure you and your spouse for 5-10 times your annual income for each of you. The reason for this is that if you were to invest that money, you could pull money from the investments to act as a steady replacement of what you or your spouse’s wage would have been if they were still alive.

If you are a stay at home mom, you will still need life insurance policy, however it will likely be less than your spouses. If something were to happen to you, your spouse would need to be able to pay to have help doing everything that you do currently. Think housekeeper, cook, childcare, running kids to and from school… ect.

If your spouse ever needed to pay for all of the things that you manage in your household now, it would likely end up costing 30, 000 to 40, 000. This number is often quoted by Dave Ramsey, and when I sat down to reduce our expenses, I was able to save $30, 000 by coming home, so I do put some stock in that dollar amount/recommendation.

8. Get a will

Now that you are thinking about your future a little bit, another uncomfortable topic is having a will and assigning a power of attorney.

I know this is not a financially related tip, however, it is really important. You want to be the one who gets to make decisions about where your child(ren) go when you are no longer here.

If you are worried about the expense (I know we are) you can often get a Notary Public to make you a simple will for around $500-$600 roughly. Phone around to see where you can find the best rates.

You don’t need anything overly complicated, but you do want to at the very least assign a guardian for your child, a beneficiary of your estate so that your child has the most amount of security if you are not here, as well as a power of attorney.

A power of attorney is able to act on your behalf in the event that you are unable to. There are different types of power attorney, so this is best discussed with your Lawyer or Notary Public as they will help you decide which best suits your needs.

Okay, enough of the uncomfortable topics.

Getting started

If you want to know HOW we have cut our family’s expenses so significantly, I have written out everything I have done and learned here:

  1. How to cut your monthly expenses.
  2. How to cut your grocery bill in half without coupons
  3. What are sinking funds, and how they could turn you into a successful saver.
  4. Our debt payoff plan

What are some things that you wish you would have known prior to going on maternity leave? Have I left anything out that I should add? Let me know in the comments below. Also, congrats to you and your little family, you are going to be amazing!


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